Red Line Voting gets Green light to Save Planet, Respect Human Rights and Stop Fat Cats

I was really pleased to take part in the debate and vote in favour of the AMNT's Red Lines initiative which was approved at our summer conference on Wednesday this week. They cover a wide range of environmental, social and corporate governance issues.

Red Line Voting empowers pension trustees to make responsible investing a reality and will direct fund managers to oppose poor governance practise in companies where failure poses a risk to its shareholders.

Trustees bodies will be able to instruct fund managers to follow all Red Lines en bloc or a sub section.  It should not cost the scheme for doing so. Fund managers will have to comply with these instructions or explain why not and then run the risk of being sacked by trustees.

On environmental Red Lines the AMNT  worked with Carbon Disclosure Project and will be urging pension schemes to adopt them as they believe it would take climate change up the UK corporate agenda.

On social issues the Red Lines include trade union recognition, race equality, gender equality, commitment to equality monitoring and publishing the data, that companies should have a plan to introduce the Living Wage, and get rid of zero hours contracts.

On governance there will be a vote against the remuneration policy if any director is paid more than 100 times the average pay in that company’s UK workforce. Also on governance companies should have a tax policy stating what their tax practises are.

The AMNT are now planning to launch Red Line Voting in Autumn, in time for the 2016 voting season. They have have worked closely with UKSIF on the development of these Red Lines and major fund managers are already preparing to implement Red Line Voting instructions.

The big campaign now is to persuade pension schemes to adopt Red Line Voting, particularly those in pooled funds. Up to now investors in pooled funds were in practise unable to direct the engagement and voting on the shares associated with their investments. Red Line Voting gets round this. Fund managers may receive dozens of Red Line Voting instructions, but they are all the same instructions so they can then allocate votes pro rata. Since more than £2-trillion of assets under management in the UK are in pooled funds this could have a significant impact.

The AMNT has been granted £75,000 by the Joseph Rowntree Charitable trust over two years to develop and launch this initiative.

Red Line Voting is a revolutionary concept. I agree with "Responsible Investment" magazine that this is "a major evolution in UK Pension funds" but think "Engaged Investor" got it right when they called it "Power to the People: the new power for trustees to control fat cat behaviour".

Many people have been involved in the AMNT project on Red Lines but special mention to its Co Chair Janice Turner, who thought it up and was the driving force behind it and Co Chair, Barry Parr and Committee member, Bill Trythall. 

AMNT Summer Conference: London 24 June 2015

"The AMNT summer conference is set to take a historic step in the advancement of the rights of pension schemes to protect their investments by actively directing fund managers' engagement and voting at company meetings.

This is an extremely important matter: insufficiently robust governance of companies has led to corporate errors and misjudgments that have cost them - and in turn the investors - billions in fines, compensation, slashed dividends and drop in shareprice. Our pensions schemes are among those that have lost out.

Until now, the ability to set an engagement and voting policy for your fund manager has generally been confined to the largest pension schemes. Small schemes and those that invest in pooled funds have faced the reluctance of fund managers to allow you to set a policy. Some have been told that your scheme is too small to have anything to do with responsible investment.

However, for the last two years AMNT has been developing a new initiative called red line voting that would enable trustee boards to play an active role in directing policy on corporate governance, social and environmental issues. And not before time: current reports indicate that legal action is being threatened against some pension schemes that are failing to address environmental risks associated with the companies in which they invest.

Those of you who have attended our meetings over the last year have received our regular reports on our development of Red Line Voting. You may also have read the very favourable reporting of it in the industry's press. We have consulted widely across the fund management industry and have worked very closely with the UK Sustainable Investment and Finance Association (www.uksif.org) so we are confident that the Red Lines we are developing are workable. We have received the public support of the previous Secretary of State for Business, Dr Vince Cable has urged the fund management industry to work with AMNT to make it happen.

On 24th June we will put our Red Lines before you for discussion and invite you to vote them into existence. So if you, like the AMNT committee, would like all pension schemes to have the option of playing an active role in responsible investment, for the long term benefit of their schemes, then please come along to your summer conference and vote them into existence.

Joining us at our summer conference will be Saker Nusseibeh, Chief Executive Officer of Hermes and Faith Ward of The Environment Agency.

Pension freedoms

We will be sharing experiences of how the pension freedoms have panned out since April and will be hearing a rather concerning analysis of the largely unnoticed crash in the bond market last October. We will be finding out what alternatives there might be.

Please register now to secure your place at the AMNT's summer conference, which takes place at BNY Mellon.

Click here to join the AMNT for free and to register also for free at the conference"

Red Lines - How to start an Investment Governance Revolution

(this post was pulled in January since I didn't realise that we had to wait until formal launch of Red Lines which took place yesterday. I will post further on this "revolutionary" proposal)

Picture is from last weeks workshop on "Red Lines" run jointly with the AMNT (Association of Member Nominated Trustees) and UKSIF (United Kingdom Sustainable  Investment & Finance Forum)

AMNT co-chair Janice Turner talks about her "Red Lines" idea to the audience.

Pension funds are blamed for being partly responsible for the crash of 2008. As asset owners they were "asleep at the wheel" and did not take their responsibility seriously and allowed the banks and financial institutions to nearly destroy our economy and seriously damage our investments.

What "Red Lines" hopes to do is to allow all pension funds regardless of size assert their rights of ownership on the assets they own and are responsible for. Small pension funds do not have a voice even though they are estimated to own £300 billion of assets. Large pension funds can afford to engage with their fund managers and the companies they own but they always lose important votes at company AGMs since most fund managers interests are not aligned with asset owner interests.

In a telling phrase from AMNT activist Bill Trythall (on left of photo) there are "Armies without generals and generals without armies".
 
Janice compared the current arrangements with the electoral system in the 18th Century when only the rich and powerful had a vote.

What  "Red Lines" is about is small and large pension funds, as well as a wide range of other charitable and ethical funds, agreeing a common set of Environment, Social and Governance (ESG) beliefs and instructing their fund managers to vote in a certain way or explain why not.

The devil will be in the detail of course but it should not be beyond the wit of man or woman to agree a common set of voting instructions to fund managers on issues based, for example, on the UK Stewardship Code or the United Nations Compact on Human Rights.

If companies do not comply with "Red Lines" instructions without good reason then fund managers should vote against the Board at AGMs and if fund managers do not comply without good reason, then they should run the risk of being sacked by trustees.

After speeches there were various workshops on how to formulate and enable "Red Lines". It is at an early stage and is going to be a time consuming and difficult process to bring about but potentially "Red Lines" will indeed revolutionise governance practices and bring about more responsible ownership and accountability.